EMPLOYERS' GROUP Ibec has said there is no room for further pay increases for public servants over the coming year due to the deteriorating state of the exchequer finances.
In a statement issued on the eve of new talks convened by Taoiseach Brian Cowen aimed at securing a national pay deal, Ibec director general Turlough O'Sullivan said the dramatic fall in revenue had to be met by "an appropriate response on the expenditure side".
"The first target must be a rigorous appraisal of current expenditure. Given that public sector pay accounts for 50 per cent of all current expenditure, there is no room for further pay increases in the coming year."
Mr O'Sullivan said the private sector had had to adjust to these adverse economic conditions through wage restraint and job losses. "Good leadership requires that some reciprocal actions be taken in the sheltered public sector."
He welcomed the Government's move to bring forward the budget, which, he said, had to put the management of the public finances back on track to restore the confidence of investors, businesses and consumers.
He said a rigorous appraisal of all current expenditure was also needed to trim spending to only the most essential elements. "Wastage must be identified and rooted out across every department, with a target established for meaningful expenditure reductions."
Mr O'Sullivan also said if it was necessary for the Government to reprioritise elements of the National Development Plan it was imperative that "those projects which are essential to the future competitiveness of our economy are not sacrificed to overcome the short-term difficulties in the public finances".
Sources close to the Irish Congress of Trade Unions (Ictu) said it would be looking for movement on the part of employers and the Government on a proposal for a new deal which it rejected a month ago.
This involves a 5 per cent increase over a 21-month period, including a six-month pay pause for most workers. Public sector staff and those in the construction sector would face a pay pause of 11 and 12 months respectively.
Unions are also concerned at Ibec proposals to extend inability-to-pay procedures.
Ictu sources said it would also be looking carefully to see what the Government would bring to the table.
Ictu sources said at the previous talks in July the Government had put forward no proposals in relation to issues such as inflation or collective bargaining rights in non-union companies.
Separately, the country's second largest union Unite said last night that any agreement reached in the reconvened pay talks would have to involve real cost of living increases, special provision for lower-paid workers and genuine progress on non-pay issues.
Unite regional secretary Jimmy Kelly said: "If these talks are to last and deliver we will need to see a real desire for engagement from all sides."
He said that relative to their European peers, Irish workers were paid less than average while Irish companies made more profits than average.
"These are real figures which, while not suited to employer arguments, have to be addressed in an open and honest manner.
"If that happens, we are there to engage."
Meanwhile, Unite said it had lodged new pay claims with a number of large companies in the private sector this week, including insurance firm Axa and chocolate manufacturer Cadbury.
The union is seeking increases of a minimum of 5 per cent to keep ahead of current inflation rates.